Paradox: n. a statement that is seemingly contradictory or opposed to common sense and yet is perhaps true
Poor: adj. impoverished, beseiged
Paul Krugman (Nobel prize-winning economist, Princeton professer, and liberal NY Times pundit) spoke to a packed house in Portland the other night as the first in our annual World Affairs Speakers Series.
The theme for this year’s series was supposed to be “The World in 2020” but Krugman rightly assumed that his audience was much more concerned about what was happening in the world in 2009, so he talked about the economic crisis.
He was funny*. And pessimistic. His basic message was that it sucks out there, everywhere – and that we have a right to be worried because we’ve never been in quite this sort of pickle. And furthermore, it’s a global crisis.
We poor consumers who have already lost jobs, health insurance, and homes aren’t stupid. We tighten our belts, hunker down and dust off grandma’s formerly quaint advice on cooking dry beans and saving string.
But thanks to the “paradox of thrift”, our sudden crave to save is making the economy spiral down faster. If we don’t buy stuff, companies don’t earn enough money to make stuff, so they lay off workers – or they drop their prices to woo buyers, causing their competitors to do so as well which also leads to stuck inventories and laid off workers.
Giving us a tax credit or tax cut may put a few bucks in our pockets, Krugman says, but we use that to pay down debt, which doesn’t help the economy. We should be spending…
(Didn’t we just try that?? like for the past couple of decades?)
If he were to advise Obama he’d tell him to make the stimulus package big enough… like about $2 trillion (!) because that’s what’s needed to get people working again so we can return to our spending ways. Unfortunately a ginormous stimulus package is a hard political sell.
Meanwhile, all the money I’ve saved from eating dog kibble the past few weeks just flew into my dentist’s pocket. It appears that kibble chomping can crack a tooth.
* Sample Krugman joke: “Capitalism is a system of exploitation of man by man. Socialism is the reverse.”